Every so often I go deep into the backend of this blog to review and delete draft blog posts (some little more than an idea) that have yet to see the light of the Internet page, and shouldn’t.
I did that today and came across a draft post from way back on a great article Phil Taylor (now a lawyer at Eversheds), wrote for the International Bar Association, entitled, Asia: Adopting the Right Mindset. The article talks about how and when lawyers should and do consider “factors beyond the letter of the law” in advising their clients. I urge you to read the entire article.
This article touches on how lawyers can best advise their clients regarding the legal issues they will face by doing business in a country where the law is unclear and/or constantly changing and/or where enforcement is spotty. Just about all countries qualify on some counts to some extent, but some countries are clearly less legalistic than others.
Phil extensively interviewed me regarding how to provide legal advice for companies doing business in countries where law is developing rapidly and where the government’s interpretations of its existing laws are inconsistent:
In countries where the law is developing rapidly, new regulations can appear almost overnight. When this happens, experienced lawyers will look at how the authorities have enforced similar laws in the past to assess the actual risks to their client. A few years ago, for example, the Chinese government announced it was making all internet-to-internet telephony illegal. But believing that China’s public would never allow such a crackdown and therefore that it would never happen, Harris says he did not advise his clients not to talk on Skype.”They [the Chinese government] just threw it out there to see what would happen,” he says. “In this kind of situation we tell them what the law is, then we talk about our experience – and often we’ll say give us a couple of days and we’ll try to find out what’s going on.”
“You can’t rely as much on the law as it’s written – that doesn’t mean you can just ignore the law. There’s a grapevine among China lawyers: you call your lawyer friends, even if you’re sure what the law is, and ask them what they’ve been hearing,” Harris continues. “I’m happiest when the law and the grapevine say the same thing.”
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An issue that can arise when helping a client form a company [typically a WFOE] in China is whether the investor can do any kind of business in the country before the company is fully set up. Although it is technically illegal to do so, many carry out some initial scoping work in the interim period. But if they are caught, Harris says, the authorities tend to take a pragmatic approach, and the investor will rarely suffer any consequences if the authorities know that a genuine company registration is pending. Experienced lawyers will explain this precedent to their clients, clarifying that this is no guarantee as to what may happen in the future and leaving it up to them to make the final risk assessment.
How do other lawyers/companies deal with these issues?